Insurers Cannot Cite 'Technical Glitches' to Evade Due Diligence in Policy Portability: Bombay High Court

Insurers Must Accept Risks 'With Eyes Open': Bombay HC Upholds Due Diligence in Policy Portability

In a significant ruling for health insurance policyholders, the Bombay High Court has declared that insurance companies cannot shirk their responsibility to conduct due diligence during the "porting" of policies. Justice Somasekhar Sundaresan, presiding over the case of Care Health Insurance Ltd v. Manjula Haresh Joisar , affirmed that an insurer who accepts a ported policy is presumed to have made an informed decision, regardless of whether technical issues hampered their access to existing data portals.

The Backdrop: A Claim Denied

The dispute arose after Mr. Haresh K. Joisar, an insured individual with a history of carcinoma, migrated his policy from Star Health to Care Health Insurance in January 2022. When a claim for subsequent hospitalization was lodged, Care Health repudiated it, citing the insured's failure to disclose his medical history.

Care Health argued that the Insurance Regulatory and Development Authority (IRDAI) portal, managed by the Indian Insurance Bureau (IIB) , had been dysfunctional at the time of portability, preventing them from accessing the claimant’s full medical records. Consequently, the insurer contended they were entitled to rely on the doctrine of uberrima fide (utmost good faith) and expected the insured to disclose all known history.

The Legal Tug-of-War

The Insurance Ombudsman , in an earlier award, ruled against the insurer, asserting that the onus of verifying claim history during porting rests with the new insurance provider.

Before the Bombay High Court , Care Health challenged this, maintaining that if they could not access the portal, the burden of disclosure shifted back to the policyholder. The Court, however, remained unmoved. Citing the IRDA (Health Insurance) Regulations, 2016, Justice Sundaresan noted that the regulatory framework for portability is designed to allow customers to switch insurers seamlessly, provided the policy has been maintained without a break.

The Court’s Reasoning

The Court emphasized that the regulatory system provides insurance companies with a specialized mechanism for sharing historical data. If an insurer finds that portal data is unavailable, the Court held they have a clear choice: reject the porting request or conduct their own investigation. By accepting the premium and initiating the coverage, the insurer effectively forfeits the right to argue later that they had incomplete information.

"The insured is entitled to believe that the new insurer had taken an informed decision on accepting the porting request," the Court noted, dismissing the argument that the institution could blame technical glitches for a lack of diligence.

Key Observations

The judgment provides a stern instruction to the insurance sector regarding their professional obligations:

• On the duty of the insurer: "When the insurer accepts the porting request, he does so with eyes open and it is presumed to be an informed decision."
• On systemic failures: "Having accepted the request for porting and having happily accepted the premium, the breakdown in the IIB portal cannot be the reason for excusing Care Health from exercise of diligence."
• On the consumer’s experience: "Such an approach would militate against the concept of 'migration' which is clearly a regulatory framework for simply moving from one insurer to another without the hassle of opening a new risk assessment all over again."
• On the regulatory objective: "It is must be legitimately and reasonably expected that insurers would exercise the highest degree of professionalism and back to back, diligence in vetting the policy particulars and claim history."

The Verdict and Its Impact

The High Court dismissed the petition, effectively solidifying the principle that insurance companies take on the risks of a new policyholder with full knowledge of the regulatory expectations.

For the insurance industry, this ruling serves as a cautionary tale: technical difficulties with regulatory infrastructure are not valid excuses for failing to perform necessary underwriting diligence. For the public, the judgment confirms that policy portability is intended to be a robust, "hassle-free" right, and that insurers are legally obligated to act professionally when inheriting the risk profiles of new policyholders.